Friday, Sept. 25, 2015

Corporate Bond Market
On Federal Reserve Chair Janet Yellen’s comment that she is ready to raise interest rates this year, equity markets worldwide rose for the first time since the Fed’s policy meeting last week.  The US market looks to follow, as DJIA futures are +220 and S&P futures are +23.25.  Bonds are down in early trading with the 30yr down 24/32’s to 2.961%.  Credit is better with the IG index -1 at 84 ¾-85 1/4.  Oil is up slightly at $45.21/bbl.

Caterpillar announced plans to reduce headcount by 10,000 and cut manufacturing space by 10% over the next two years underscoring the depth of the downturn in the mining and energy sectors.

There were no new issues done in the primary IG market.

On the economic front there are several data releases today: GDP (8:30am), Personal Consumption (8:30am), GDP Deflator (8:30am), and U of Mich. Consumer Index (10:00am).


Municipal Bond Market
Munis rallied yesterday as the market continues to look to Treasuries for direction.  We saw aggressive buying longer out on the curve with very little flow in the front end.  This week’s largest deal (NYC TFA) continued to see strong demand in the secondary with most maturities trading up 3bps-5bps from the original pricing.  Most maturities traded up 3bps with some trading up as much as 5bps.  Muni funds reported inflows for the first time in 5 weeks with $233 million flowing into funds.  30-day supply is stronger this morning with $9 billion on tap over the next 30 days versus $7 billion yesterday.

Puerto Rico said it will take into account the constitutional priority given to general-obligation bonds when it restructures $72 billion of debt.  PR debt was unchanged in early trading but the news should be positive for GO bonds .  Benchmark GO 8’s of 2035 continue to stabilize in the mid $70s with 5mm bonds trading @ $74.75 (11.195%) yesterday.

30-Day visible supply: $9bn


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